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March 30, 2016

Consider the three-property, nearly 800,000 square foot Woodland portfolio located in Woodland, California. The institutionally-owned portfolio is comprised of distribution buildings, which aim to quickly and seamlessly funnel goods to customers. Everything in the property—from the loading docks to the hydraulic lifts—is synchronized to maximize efficiency. But between wall mounts, outdoor and ceiling lighting, there are nearly 150 lighting fixtures within this one building, all of which are using energy, and costing dollars.

But short of turning the lights off, how can investors and tenants maximize their energy savings for commercial properties?

Respondents to a new report, “World Green Building Trends 2016,” say they expect 13 percent savings in operational costs for green retrofit and renovation projects during the next five years and 40 percent of U.S. respondents plan to conduct retrofitting by 2018.

“Across the country, there are many state initiatives offered to tenants for ‘going green,’” says Angela Alfano, Group Manager with JLL Property Management in New Jersey. “If the tenant is committed to green investment and maintenance, rebates and tax incentives add up and investment in energy-efficient LED fixtures can save tens of thousands of dollars in annual operations costs.”

According to the report, building owners responded that green buildings—both new and retrofitted—command a seven percent increase in asset value over conventional buildings. But that’s the long-term view.  Many investors are more focused on the short-term—or their expenses at this moment in time.

“Green initiatives for commercial properties are primarily driven by corporate policy,” says Nora Neilson, Regional Manager with JLL Property Management in North Carolina. “The other driver is whether a particular tenant is proactive on going green and this is more often the case among local and/or smaller tenants.”

Whether it’s a more significant investment to obtain LEED certification or more modest upgrades to reach Energy Star standards, Neilson notes that it’s often the tenant who brings the topic of green initiatives to the table. After a budget review and discussion, landlords are encouraged to incorporate changes into the tenant build out. These build outs contribute directly to the bottom line: satisfied tenants are more likely to renew leases and thus, increase the buildings’ value.

Whether the investment retains tenants or hits the corporate responsibility mark, JLL Property Management agrees there is a major case to be made for going green, so long as building ownership and the tenants are on the same page with these initiatives.

“Each year, the sustainability impact grows,” says Neilson. “Previously, owners and tenants were hesitant about pursuing these efficiency upgrades and were waiting for someone else to test the waters. But now, going green is gaining traction and each year, we’re working with more building owners who are committing to green initiatives.”

Institutional owners are driving the business case for sustainable, energy efficient operations by saving more than spending to execute the strategy and improving efficiency while reducing environmental impact.

Remember that Woodland portfolio?  An institutional investor challenged JLL Property Management to secure additional energy savings after retrofitting interior lighting in 2009. The JLL team worked with Barnum and Celilo Electric, Inc. and AXIS Energy Partners to replace all exterior lighting with energy efficient options and secured rebates which cut project costs by nearly $30,000. Case in point: that investor saved a combined 65,000 KWH or $9,000 in energy costs after just 121 days. Going green, in more ways than one.

JLL Property Management

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